Does high growth persist? A focus on growth formulas and the influence of firm exits

This study investigates the development of firms after high-growth. We argue that the formula used for measuring growth determines results. Implications from different formulas are tested with data from Amadeus on Bulgarian firms for the years 2001-2010. We provide first evidence for an absolute growth formula and its systematic comparison to alternative choices. The focus is on growth in employees, but we offer additional evidence for sales and profits. Using a two-part regression model with separate equations for survival and growth, we find that high-growth does not persist when size of exits is accounted for. Losses by exiting high-growth firms outweigh further gains in size by survivors. This result equally holds for the 1 percent fastest growers in absolute terms, the top 1 percent in terms of log growth and high-growth firms defined according to Eurostat-OECD. Implications for the future study of high-growth firms and policies focused at them are discussed.